FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported fiscal second quarter 2022
financial results for the 13-week period ending June 26, 2022.
Andy Wiederhorn, President and CEO of FAT
Brands, commented, “The second quarter marked yet another strong
performance for FAT Brands, characterized by robust unit
development and profitable revenue growth. After a very active
acquisition strategy in 2021, I am particularly pleased with the
momentum of our organic growth strategy for the first half of this
year.”
“Year to date, we have opened 62 restaurants,
including 26 that opened in the second quarter, and remain on track
to open 120 new restaurants in 2022, which represents a 5% unit
expansion year over year. We are seeing strong new franchisee
activity as well as continued demand from existing franchise
partners to develop other brands within our portfolio, which is
very encouraging as we look beyond our current unit development
pipeline of over 900 locations representing 50% EBITDA growth
over the next several years.”
“As we have stated, 2022 is a year to digest the
acquisitions of 2021 and capitalize on the potential synergies they
present. That being said, our acquisition strategy is one of the
core pillars of FAT Brands, and we will continue to evaluate and
capitalize on potential candidates as we see fit. In May 2022, we
saw great value in acquiring the Nestlé® Toll House® Café by Chip®
Franchise Business, which will be rebranded as Great American
Cookies. This tuck-in acquisition not only increases our foothold
in the dessert category, but also allows us to continue to grow our
manufacturing business. We anticipate the first store conversion to
be completed in September 2022 and we look forward to increasing
the profitability of the franchisees that have joined us through
this acquisition via our increased scale and the cost savings
generated from our manufacturing facility.”
Fiscal Second Quarter 2022
Highlights
- Total revenue
improved 1,141% to $102.8 million compared to $8.3 million in the
second quarter of 2021
- System-wide sales
growth of 284% in the second quarter of 2022 compared to the prior
year quarter
- System-wide same-store sales growth
of 5.6% in the second quarter of 2022 compared to the prior year
quarter
- 26 new store openings during the
second quarter of 2022 bringing our system-wide store count to
2,354 as of June 26, 2022
- Net loss of $8.2 million or $0.50 per
diluted share compared to $5.9 million or $0.48 per diluted share
in the second quarter of 2021
- Adjusted EBITDA(1) of $29.5
million compared to $2.1 million in the second quarter of 2021
- Adjusted net loss(1) of $3.1
million, or $0.19 per diluted share, compared to $1.1 million, or
$0.09 per diluted share in the second quarter of 2021
(1) EBITDA,
Adjusted EBITDA and adjusted net loss are non-GAAP measures defined
below, under “Non-GAAP Measures”. Reconciliation of GAAP net income
to EBITDA, adjusted EBITDA and adjusted net loss are included in
the accompanying financial tables.
Summary of Second Quarter 2022 Financial
Results
Total revenue was $102.8 million in the second
quarter of 2022 compared to $8.3 million in the second quarter of
2021, reflecting revenue from the acquisition of Global Franchise
Group in July 2021, the acquisition of Twin Peaks in October 2021,
the acquisition of Fazoli's and Native Grill & Wings in
December 2021 (collectively, the "2021 Acquisitions") and the
continuing recovery from the negative effects of the COVID-19
pandemic on royalties from restaurant sales.
Costs and expenses increased to $89.6 million in
the second quarter of 2022 compared to $7.2 million in the second
quarter of 2021.
General and administrative expenses increased
$15.7 million to $20.8 million in the second quarter compared to
$5.1 million in the prior year, primarily due to the 2021
Acquisitions and increased compensation costs, professional fees
and travel, reflecting the significant expansion of the
organization.
Cost of restaurant and factory revenues totaled
$49.8 million in the second quarter of 2022 and were exclusively
related to the 2021 Acquisitions. These costs relate to the
operations of company owned restaurant locations and the dough
factory operated by Global Franchise Group, which currently sells
products exclusively to our brands. Depreciation and amortization
increased $6.3 million to $6.7 million in the second quarter of
2022 compared to the same period in the prior year, primarily due
to depreciation of company-owned restaurant property and equipment
and amortizing intangible assets related to the 2021
Acquisitions.
Advertising expenses increased $10.2 million to
$11.6 million in the second quarter of 2022 compared to the prior
year period. These expenses vary in relation to the advertising
revenue and reflect advertising expenses related to the 2021
Acquisitions and the increase in customer activity as the recovery
from COVID continues.
Other expense for the second quarter of 2022 and
2021 was $21.6 million and $9.1 million, respectively, primarily
comprised of net interest expense of $23.7 million and $2.7
million, respectively. Other expense for the second quarter of 2021
also consisted of a $6.4 million net loss on the extinguishment of
debt.
Adjusted net loss was $3.1 million, or $0.19 per
diluted share, in the second quarter of 2022 compared to $1.1
million, or $0.09 per diluted share, in the second quarter of
2021.
Key Financial Definitions
New store openings - The number of new
store openings reflects the number of stores opened during a
particular reporting period. The total number of new stores per
reporting period and the timing of stores openings has, and will
continue to have, an impact on our results.
Same-store sales growth - Same-store sales
growth reflects the change in year-over-year sales for the
comparable store base, which we define as the number of stores open
and in the FAT Brands system for at least one full fiscal year. For
stores that were temporarily closed, sales in the current and prior
period are adjusted accordingly. Given our focused marketing
efforts and public excitement surrounding each opening, new stores
often experience an initial start-up period with considerably
higher than average sales volumes, which subsequently decrease to
stabilized levels after three to six months. Additionally, when we
acquire a brand, it may take several months to integrate fully each
location of said brand into the FAT Brands platform. Thus, we do
not include stores in the comparable base until they have been open
and in the FAT Brands system for at least one full fiscal year. For
2022, the comparable store base does not include concepts acquired
during fiscal 2021.
System-wide sales growth - System wide
sales growth reflects the percentage change in sales in any given
fiscal period compared to the prior fiscal period for all stores in
that brand only when the brand is owned by FAT Brands. Because
of acquisitions, new store openings and store closures, the stores
open throughout both fiscal periods being compared may be different
from period to period.
Conference Call and Webcast
FAT Brands will host a conference call and
webcast to discuss its fiscal second quarter 2022 financial results
today at 5:00 PM ET. Hosting the conference call and webcast will
be Andy Wiederhorn, President and Chief Executive Officer, and Ken
Kuick, Chief Financial Officer.
The conference call can be accessed live over
the phone by dialing 1-877-704-4453. A replay will be available
after the call until Thursday, August 4, 2022, and can be accessed
by dialing 1-844-512-2921. The passcode is 13730875. The webcast
will be available at www.fatbrands.com under the
“Investors” section and will be archived on the site shortly after
the call has concluded.
About FAT (Fresh. Authentic. Tasty.)
BrandsFAT Brands (NASDAQ: FAT) is a leading global
franchising company that strategically acquires, markets, and
develops fast casual, quick-service, casual dining, and polished
casual dining concepts around the world. The Company currently owns
17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab
Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American
Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express,
Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native
Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza
Steakhouses and franchises and owns over 2,300 units worldwide. For
more information, please visit www.fatbrands.com.
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements relating to the future
financial and operating results of the Company, including estimates
of annual EBITDA, our ability to conduct future accretive
acquisitions, our pipeline of new store locations, and the recovery
of our business from the current novel coronavirus pandemic
(“COVID-19”), including our revenue performance and reopening of
special venues. Forward-looking statements generally use words such
as “expect,” “foresee,” “anticipate,” “believe,” “project,”
“should,” “estimate,” “will,” “plans,” “forecast,” and similar
expressions, and reflect our expectations concerning the future. It
is possible that our future performance may differ materially from
current expectations expressed in these forward-looking statements.
Forward-looking statements are subject to significant business,
economic and competitive risks, uncertainties and contingencies
including, but not limited to, uncertainties surrounding the
severity, duration and effects of the COVID-19 pandemic and the
effects of the Delta variant of COVID-19, many of which are
difficult to predict and beyond our control, which could cause our
actual results to differ materially from the results expressed or
implied in such forward-looking statements. We refer you to the
documents we file from time to time with the Securities and
Exchange Commission, such as our reports on Form 10-K, Form 10-Q
and Form 8-K, for a discussion of these and other risks and
uncertainties that could cause our actual results to differ
materially from our current expectations and from the
forward-looking statements contained in this press release. We
undertake no obligation to update any forward-looking
statements to reflect events or circumstances occurring after
the date of this press release.
Non-GAAP Measures
(Unaudited)
This press release includes the non-GAAP
financial measure of EBITDA and Adjusted EBITDA.
EBITDA is defined as earnings before interest,
taxes, depreciation and amortization. We use the term EBITDA, as
opposed to income from operations, as it is widely used by
analysts, investors and other interested parties to evaluate
companies in our industry. We believe that EBITDA is an appropriate
measure of operating performance because it eliminates the impact
of expenses that do not relate to business performance. EBITDA is
not a measure of our financial performance or liquidity that is
determined in accordance with generally accepted accounting
principles (“GAAP”), and should not be considered as an alternative
to net income (loss) as a measure of financial performance or cash
flows from operations as measures of liquidity, or any other
performance measure derived in accordance with GAAP.
Adjusted EBITDA is defined as EBITDA (as defined
above), excluding expenses related to acquisitions, refranchising
gain or losses, impairment charges, and certain non-recurring or
non-cash items that the Company does not believe directly reflect
its core operations and may not be indicative of the Company’s
recurring business operations.
Adjusted net loss is a supplemental measure of
financial performance that is not required by or presented in
accordance with GAAP. Adjusted net loss is defined as net loss plus
the impact of adjustments and the tax effects of such adjustments.
Adjusted net loss is presented because we believe it helps convey
supplemental information to investors regarding our performance,
excluding the impact of special items that affect the comparability
of results in past quarters to expected results in future quarters.
Adjusted net loss as presented may not be comparable to other
similarly titled measures of other companies, and our presentation
of adjusted net loss should not be construed as an inference that
our future results will be unaffected by excluded or unusual items.
Our management uses this non-GAAP financial measure to analyze
changes in our underlying business from quarter to quarter based on
comparable financial results.
Reconciliations of net loss attributable to FAT
Brands Inc. presented in accordance with GAAP to EBITDA, adjusted
EBITDA and adjusted net loss are set forth in the tables below.
Investor Relations:
ICRMichelle Michalskiir-fatbrands@icrinc.com
646-277-1224
Media Relations:
FAT BrandsErin
Mandzikemandzik@fatbrands.com860-212-6509
FAT Brands Inc. Consolidated Statements of
Operations
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
|
|
June 26, 2022 |
|
|
June 27, 2021 |
|
|
June 26, 2022 |
|
|
June 27, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
$ |
21,665 |
|
|
$ |
6,161 |
|
|
$ |
42,563 |
|
|
$ |
11,057 |
|
Restaurant sales |
|
|
60,044 |
|
|
|
234 |
|
|
|
118,121 |
|
|
|
234 |
|
Advertising fees |
|
|
9,568 |
|
|
|
1,370 |
|
|
|
18,929 |
|
|
|
2,560 |
|
Factory revenues |
|
|
8,570 |
|
|
|
— |
|
|
|
16,749 |
|
|
|
— |
|
Franchise fees |
|
|
1,295 |
|
|
|
482 |
|
|
|
2,009 |
|
|
|
1,022 |
|
Management fees and other income |
|
|
1,643 |
|
|
|
35 |
|
|
|
1,817 |
|
|
|
58 |
|
Total revenue |
|
|
102,785 |
|
|
|
8,282 |
|
|
|
200,188 |
|
|
|
14,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
|
20,841 |
|
|
|
5,097 |
|
|
|
45,437 |
|
|
|
9,624 |
|
Cost of restaurant and factory revenues |
|
|
49,846 |
|
|
|
244 |
|
|
|
104,644 |
|
|
|
244 |
|
Depreciation and amortization |
|
|
6,711 |
|
|
|
386 |
|
|
|
13,181 |
|
|
|
784 |
|
Refranchising loss (gain) |
|
|
453 |
|
|
|
(856 |
) |
|
|
1,001 |
|
|
|
(429 |
) |
Acquisition costs |
|
|
135 |
|
|
|
917 |
|
|
|
383 |
|
|
|
932 |
|
Advertising fees |
|
|
11,596 |
|
|
|
1,367 |
|
|
|
21,853 |
|
|
|
2,560 |
|
Total costs and expenses |
|
|
89,582 |
|
|
|
7,155 |
|
|
|
186,499 |
|
|
|
13,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
13,203 |
|
|
|
1,127 |
|
|
|
13,689 |
|
|
|
1,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income,
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(18,998 |
) |
|
|
(2,406 |
) |
|
|
(38,026 |
) |
|
|
(4,866 |
) |
Interest expense related to preferred shares |
|
|
(4,715 |
) |
|
|
(264 |
) |
|
|
(6,714 |
) |
|
|
(552 |
) |
Net loss on extinguishment of debt |
|
|
— |
|
|
|
(6,405 |
) |
|
|
— |
|
|
|
(6,405 |
) |
Other income, net |
|
|
2,071 |
|
|
|
25 |
|
|
|
3,381 |
|
|
|
123 |
|
Total other (expense) income, net |
|
|
(21,642 |
) |
|
|
(9,050 |
) |
|
|
(41,359 |
) |
|
|
(11,700 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
expense |
|
|
(8,439 |
) |
|
|
(7,923 |
) |
|
|
(27,670 |
) |
|
|
(10,484 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
provision |
|
|
(251 |
) |
|
|
(1,992 |
) |
|
|
4,273 |
|
|
|
(2,121 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(8,188 |
) |
|
|
(5,931 |
) |
|
$ |
(31,943 |
) |
|
|
(8,363 |
) |
Less: Net loss attributable to
noncontrolling interest |
|
|
— |
|
|
|
(5 |
) |
|
|
— |
|
|
|
(5 |
) |
Net loss attributable to FAT
Brands Inc. |
|
$ |
(8,188 |
) |
|
$ |
(5,926 |
) |
|
$ |
(31,943 |
) |
|
$ |
(8,358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per
common share |
|
$ |
(0.50 |
) |
|
$ |
(0.48 |
) |
|
$ |
(1.95 |
) |
|
$ |
(0.69 |
) |
Basic and diluted weighted
average shares outstanding |
|
|
16,405,108 |
|
|
|
12,275,370 |
|
|
|
16,396,896 |
|
|
|
12,122,938 |
|
Cash dividends declared per
common share |
|
$ |
0.13 |
|
|
$ |
0.13 |
|
|
$ |
0.26 |
|
|
$ |
0.26 |
|
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA
Reconciliation
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
(in thousands) |
|
June 26, 2022 |
|
|
June 27, 2021 |
|
|
June 26, 2022 |
|
|
June 27, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,188 |
) |
|
$ |
(5,926 |
) |
|
$ |
(31,943 |
) |
|
$ |
(8,358 |
) |
Interest expense, net |
|
|
23,713 |
|
|
|
2,670 |
|
|
|
44,740 |
|
|
|
5,418 |
|
Income tax (benefit) provision |
|
|
(251 |
) |
|
|
(1,992 |
) |
|
|
4,273 |
|
|
|
(2,121 |
) |
Depreciation and amortization expense |
|
|
6,711 |
|
|
|
386 |
|
|
|
13,181 |
|
|
|
784 |
|
EBITDA |
|
|
21,985 |
|
|
|
(4,862 |
) |
|
|
30,251 |
|
|
|
(4,277 |
) |
Provision for bad debts |
|
|
239 |
|
|
|
23 |
|
|
|
423 |
|
|
|
23 |
|
Share-based compensation expenses |
|
|
1,934 |
|
|
|
193 |
|
|
|
4,046 |
|
|
|
230 |
|
Non-cash lease expenses |
|
|
457 |
|
|
|
271 |
|
|
|
741 |
|
|
|
312 |
|
Acquisition costs |
|
|
134 |
|
|
|
917 |
|
|
|
383 |
|
|
|
932 |
|
Refranchising loss |
|
|
453 |
|
|
|
(856 |
) |
|
|
1,001 |
|
|
|
(429 |
) |
Litigation costs |
|
|
4,308 |
|
|
|
— |
|
|
|
7,264 |
|
|
|
— |
|
Severance |
|
|
— |
|
|
|
— |
|
|
|
526 |
|
|
|
— |
|
Net loss on extinguishment of debt |
|
|
— |
|
|
|
6,405 |
|
|
|
— |
|
|
|
6,405 |
|
Net loss related to advertising fund deficit |
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
29,510 |
|
|
$ |
2,091 |
|
|
$ |
44,645 |
|
|
$ |
3,196 |
|
FAT Brands Inc. Adjusted Net Loss
Reconciliation
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
(in thousands, except share
and per share data) |
|
June 26, 2022 |
|
|
June 27, 2021 |
|
|
June 26, 2022 |
|
|
June 27, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,188 |
) |
|
$ |
(5,926 |
) |
|
$ |
(31,943 |
) |
|
$ |
(8,358 |
) |
Refranchising loss |
|
|
453 |
|
|
|
(856 |
) |
|
|
1,001 |
|
|
|
(429 |
) |
Acquisition costs |
|
|
134 |
|
|
|
917 |
|
|
|
383 |
|
|
|
932 |
|
Litigation costs |
|
|
4,308 |
|
|
|
— |
|
|
|
7,264 |
|
|
|
— |
|
Severance |
|
|
— |
|
|
|
— |
|
|
|
526 |
|
|
|
— |
|
Net loss on extinguishment of debt |
|
|
— |
|
|
|
6,405 |
|
|
|
— |
|
|
|
6,405 |
|
Tax adjustments, net |
|
|
146 |
|
|
|
(1,626 |
) |
|
|
(1,417 |
) |
|
|
(1,398 |
) |
Adjusted net loss |
|
$ |
(3,147 |
) |
|
$ |
(1,086 |
) |
|
$ |
(24,186 |
) |
|
$ |
(2,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per basic and diluted
share |
|
$ |
(0.50 |
) |
|
$ |
(0.48 |
) |
|
$ |
(1.95 |
) |
|
$ |
(0.69 |
) |
Adjusted loss per basic and
diluted share |
|
$ |
(0.19 |
) |
|
$ |
(0.09 |
) |
|
$ |
(1.48 |
) |
|
$ |
(0.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic and
diluted shares outstanding |
|
|
16,405,108 |
|
|
|
12,275,370 |
|
|
|
16,396,896 |
|
|
|
12,122,938 |
|
(1) Reflects the tax impact of the
adjustments using the effective tax rate for the respective
periods
FAT Brands (NASDAQ:FATBP)
Historical Stock Chart
From Jun 2024 to Jul 2024
FAT Brands (NASDAQ:FATBP)
Historical Stock Chart
From Jul 2023 to Jul 2024